News Update

After reporting its Sept. quarter results, Apollo Tyres stock rose 6%, approaching a record high

• ByStartupStory     |    November 16, 2022

In an otherwise quiet market on Tuesday, shares of Apollo Tyres rose 6% on the BSE and reached a multi-year high of Rs 303.40 after the company reported double-digit revenue growth and earnings before interest, taxes, depreciation, and amortization (Ebitda) growth in the September quarter (Q2 FY23) despite a difficult business environment.

The stock was up 4% at Rs 297.65 at 12:11 PM, while the S&P BSE Sensex was down 0.21% at the same time. By the time this report was being written, a total of 11.87 million shares had traded hands on the NSE and BSE, virtually tripling the counter’s trading volume. The stock was trading close to its all-time high of Rs 307, which it reached on April 17, 2018.

Due to higher sales, the company’s consolidated net profit increased 11% year over year (YoY) in Q2 FY23 to Rs 194 crore. Previously, the large tire manufacturer claimed a net profit of Rs 174 crore. It reported a 17% YoY rise in revenues at Rs 5,956 crore in a challenging environment, largely due to price increases.

Consolidated Ebitda margin at 12% was down 61 bps year over year but up 35 bps quarter over quarter. Despite cost pressure, it reported sequential improvements in standalone and European operating margin performance.

“The pricing environment remained stable, and the company undertook price increases of up to around 5 percent in the replacement segment. In terms of the demand outlook, the company is cautiously optimistic. Corrections in input prices should help operating margin performance in the near and medium terms,” the company said.

The performance of Apollo Tires’ gross margin was broadly in line with expectations, according to ICICI Securities. While staff costs and other expenses decreased by 54 and 60 basis points QoQ, respectively, and by 80 basis points QoQ, the gross margin decreased. Ebitda margins on an independent basis were at 10.3% (up 62 bps QoQ), aided by operating leverage improvements and a stable gross margin.

The brokerage firm stated that it has a favorable impression of the company and that it is primarily monitoring regulated capex expenditures while putting an emphasis on capital efficiency and balance sheet strength.

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